Common Crypto arbitrage pitfalls, and how to avoid them with AlphaRoc
At present, there are more than 3000 cryptocurrency, and more than 300 cryptocurrency exchanges ( according to coinmarketcap ). That volume of exchange opens the door to arbitrage trading, as the prices of the same coins are different between these exchanges and there are plenty of opportunities out there. However, Just as other investment vehicles, crypto arbitrage is not risk-free and there is much to learn and master to be able to make a good return on a consistent basis.
1) Coins with the same name
You will be surprised how many people buy the wrong coin because of coins with identical or similar names. With over a thousand cryptocurrency coins available for purchase, many projects have similar or even the same symbol names. For instance, there is a project called SIA, it’s Decentralized storage, and the symbol is very similar to the Single Collateral DAI called SAI. If you confuse the two you can lose all your coins. More troubling, is symbols with the same exact names. For example, Binance exchange has CMT symbol that is the CyberMiles currency, however, Cryptopia exchange has CMT ticker, but it’s the Comet currency. Another example is the HNC symbol, which is named HellenicCoin on Livecoin exchange, but Huncoin is on Coinexchange with the same symbol name HNC.
Some solutions to this will be to first check the price and volume, also check the logo of each exchange.
2) Deposit needs manual process
This happens on exchanges that deposits are not being processed electronically and you need to get in touch with the exchange to figure out where is your funds. Just to hear that the exchange needs to do a “manual” process. It’s not clear why this is happening, as the exchange may not offer any explanation. That’s why the best advice dealing with Crypto is a trade only what you can lose is so common.
One solution to this would be to break transactions to small and large transactions, by first sending a smaller transaction than committing to a larger one, this will reduce the risk for the trader, however, this also means larger fees, since they are paid twice. In AlphaROC, all funds are deposited into reputable exchanges, no fuss is needed for the trader when engaging in arbitrage trading.
3) Timed opportunity
Although there is an abundance of opportunities on many of the exchanges out there, it is still a scarcity timed opportunity per the transaction itself and you need to move fast to ensure you can commit your trade on time and exit with profit as the market conditions can change in seconds in the crypto world.
One solution to this is to use arbitraget tools. In order to ensure you can achieve your checks and commit your transaction, you need to have tools and an exact plan to scan for an opportunity as well as check profit and commit the transaction. This can be done by using online tools and apps, such as tradingwatcher offers or using an excel sheet with links, or even a notebook, whatever works for you. It just needs to be done quickly and efficiently.
In AlphaROC, we adopt the use of Strong AI to make situational decisions, along with machine learning to collect data and run the statistical analysis with past data to form predictive analysis. Also, as speed is everything in arbitrage, our servers are placed strategically in data centers to get price feeds faster than others. As such, the time between executing trades are done in nanoseconds.
4) High trading fees
Last but not least, some exchanges charge high and unreasonable trading fees and these fees can change overnight. For instance, Coinbase Pro’s decided in 2019 to increase their fees by 233% for ‘Lower-Volume’ traders (traders trading $10,000 and below). Makers’ fees changed from 0.15% to 0.50% and takers’ fees changed from 0.25% to 0.5%.
Always check both the taker and makers fees and add them into your transaction costs to calculate your profits.
Some exchange offers large discount for using their coins for transaction, and for big volume. This increases profitability especially when there are multiple of trades. At AlphaROC, our funds are pooled, thus we enjoy low transaction costs when trading, which increases our profits multiple folds.
Find out more from alpharoc.tech, your one stop solution to higher yields.